June 30, 2008
US beef prices surge 20 percent above year-ago levels
US wholesale beef prices have surged during the second half of June and both the choice and select grade carcass composite values reported at midday are approximately 20 percent above year-ago levels.
Wholesale beef prices during the first half of the month were choppy but at mid-month, the markets turned stronger, with the choice higher for 10 consecutive days and select up in eight of the last 10 days.
Strong seasonal demand for beef domestically, along with an improved outlook for exports and fewer young cattle placed into the feedyards in the latest three months have contributed to the higher prices.
Record-high corn prices caused by Midwest floods have pushed up feed costs for the cattle feeders, many of whom have been losing money over the past two years.
Dan Vaught, analyst with Wachovia Securities in St. Louis, said deferred live cattle futures are projecting prices to exceed the current record high for the cash cattle market, which was set in October of 2003 at US$107.21. That figure was the weekly average for cattle sold in the Texas Panhandle. All trading months after August are above the current record for cash, he said.
August live cattle Friday closed at 105.10 cents, while October finished the day at US$112.40. The highest close in live cattle on the day was in the April 09 contract at 117.65 cents.
Analysts and brokers said severe drought conditions in the southeast region of the country last year along with rising feed and energy costs have caused some cow-calf operations to reduce the size of their herds.
The fed cattle markets also climbed this week. The USDA reported cash cattle trades for the week US$3 to US$3.50 per hundredweight higher in Texas/western Oklahoma at US$99 to US$99.50. Prices in Kansas were US$2 to US$3 higher at mostly US$98.
This week's cattle slaughter was estimated at 706,000 head, compared with 694,000 a week ago and 696,000 a year ago. Year-to-date cattle slaughter is up 1.0 percent from a year ago.
The week's hog slaughter was estimated at 2.130 million head, compared with 2.081 million last week and 1.945 million a year ago. Year-to-date hog slaughter is up 9.6 percent.
The USDA estimated total meat production for the week at 970.0 million pounds. Last week's output was 950.2 million pounds, and the year-ago figure was 927.1 million pounds. Year-to-date combined meat output is up 5.3 percent.